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Author: Faisal Shahnawaz

  • Karachi Chamber urges shipping lines to waive detention charges

    Karachi Chamber urges shipping lines to waive detention charges

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has urged shipping lines to waive detention and other charges considering extraordinary situation due to coronavirus and lockdown.

    To support the consignees in Pakistan during the ongoing difficult times, President KCCI Agha Shahab Ahmed Khan urged all shipping lines and their agents in Pakistan to give total waiver of detention charges and any penalties or charges under other heads on all consignments that landed from March 10, 2020 up to May 31. 2020.

    In separate letters sent to All Pakistan Shipping Association and Pakistan Ships’ Agents Association, President KCCI pointed out that in the present extra-ordinary circumstances, the shipping lines and agents have a moral and ethical responsibility to extend relief to the consignees and waive the entire detention charges and any other penalties or charges on FCL and LCL consignments, to facilitate clearance and delivery of cargo to the consignees.

    “It is important to mention that the Ministry of Maritime Affairs and KPT have also approved the waiver of port demurrage and allowed additional 10 days of free storage for the imported cargoes. But unfortunately due to accumulated detention charges importers are unable to clear their containers,” he added.

    He said that due to the lockdown during the months of March and April 2020 imposed by the government to prevent the spread of coronavirus pandemic, many importers have not been able to clear the import cargoes within the stipulated free detention period allowed.

    Consequently, very large amounts of detention charges and penalties have accumulated which the consignees are unable to pay, while also a large number of containers have piled up at the ports.

    He informed that during the last few weeks, KCCI received a large number of representations from trade and industry which are facing heavy losses due to the exorbitant container detention charges by including shipping agents and representatives of shipping lines.

    The losses are over and above those caused by a sharp decline in prices of various commodities and products which have been imported by these consignees, thus making it impossible to pay for the heavy detention and other penal charges demanded by the shipping agents and their principals.

    Many such entities have been pushed to a situation of Force Majeure.

    Agha Shahab further noted with deep concern that the same shipping lines have voluntarily extended concessions and relief to their clients in India while they have refused to allow any concession to consignees based in Pakistan.

    He was of the opinion that Pakistan’s shipping trade has been a lucrative source of income for shipping lines who have earned decent profits from this market for many years.

    “It is time they support the consignees in a situation where the entire global economy is passing through an unprecedented crisis and all business entities in Pakistan are incurring heavy losses as a consequence of extra-ordinary circumstances,” he stressed.

  • SBP decides not to issue fresh currency notes for Eid ul Fitr

    SBP decides not to issue fresh currency notes for Eid ul Fitr

    KARACHI: State Bank of Pakistan (SBP) on Monday said that it will not issue fresh currency notes on this Eid ul Fitr.

    The decision has been taken due to measures taken by the government to prevent spread of COVID-19.

    The SBP issued a notification suspending the issuance of fresh currency notes to public.

    The SBP said that the bank’s management had taken multiple precautionary measures to ensure social distancing and mitigate the spread of COVID-19.

    “These include but are not limited to performing of only essential / critical functions, making comprehensive work from home arrangements, ensuring workplace SOPs, issuance of medical advisories, etc.”

    Accordingly, the bank’s COVID-19 committee had decided not to issue fresh notes to general public and employees / ex-employees of SBP and its subsidiaries on occasion of Eid-ul-Fitr 2020.

  • PSX proposes funded pension scheme

    PSX proposes funded pension scheme

    KARACHI: Pakistan Stock Exchange (PSX) has proposed funded pension scheme that should offer old age benefits to retired employees at public sector enterprises and government workers, without putting burden on the annual budget.

    At present, Pakistan’s pension scheme for government employees is an un-funded, pay-as-you-go scheme. Government of Pakistan exclusively finances the pension expenditure by obtaining a provision in the annual budget for this purpose.

    This has all the making of an impending pension crisis in future, and places unfair burden on future generations. In case of public sector enterprises too, much of the pension liability remains unfunded.

    The future monetary obligations are taken to be met from taxation, which places undue fiscal burden and responsibility on future generations. Age analysis of population suggests growing state pension expenses given the expected increase in the older age group.

    These conditions have led to increasingly stressed pension arrangement.

    Pension’s system reforms are focused on extending coverage to funded pension systems, which are professionally managed, extend to the informal sector, and facilitate switching from the existing employer schemes.

    While in the public sector, funds have been created at the provincial level to pre-fund the future liability.

    The PSX said that government of various countries have actively worked to provide financial security for their aging populations by maintaining adequately funded pension funds.

    These pension funds invest in a diversified range of global assets including equities, bonds, mutual funds, ETFs, and even real estate, infrastructure, and alternative assets.

    In Canada, the CPPIB (Canada Pension Plan Investment Board) is the government’s primary pension scheme, and has grown to become one the largest pension funds in the world.

    The CPPIB invests in the full stack of assets outlined above and returns are used to finance government’s pension liabilities every year. This takes the burden of pensions away from the annual budget.

    The CPP fund now manages over $409.5 billion in asset, up from $128 billion in 2010.

    An actively managed government pension fund in Pakistan will also help channel investment towards capital markets, since equities feature heavily at global pension funds.

    In Pakistan, the federal government could set up such an investment holding as a single-purpose asset management company with 100 percent control, and run by professional investment managers.

    The government should start funding its pension liabilities to avert a future pension crisis and encourage capital formation in Pakistan. An adequately funded pension scheme would offer old age benefits to retired employees at public sector enterprises and government workers, without putting burden on the annual budget. Further, it is recommended that a certain percentage of the funded pension scheme be invested in the capital markets.

    With Pakistan facing very high levels of poverty and the Government of Pakistan facing a rise in the old age population and having a scarcity of resources and funds to provide any old age benefits. An adequately funded pension scheme is one of the resources which the Government of Pakistan could offer to facilitate retired public sector employees.

    This would result in improvement in liability management of Federal Government Employees Pension Scheme.

    Appropriate amendment to be made in the Income Tax Ordinance, 2001.

  • Stock market falls by 195 points amid profit taking

    Stock market falls by 195 points amid profit taking

    KARACHI: The stock market witnessed decline of 195 points on Monday amid profit taking during the day. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,916 points as against 34,112 points showing a decline of 195 points.

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  • SBP allows circulation of quarantined infected banknotes

    SBP allows circulation of quarantined infected banknotes

    KARACHI: State Bank of Pakistan (SBP) has advised banks to use the infected banknotes that have completed 14 days quarantine period.

    The SBP on Monday issued advisory for banks related to COVID-19 – Uninterrupted Supply of Disinfected Cash at Banks and ATMs.

    The SBP previously issued a circular dated March 23, 2020 under which banks were advised to disinfect, seal and quarantine the cash collected from hospitals and clinics, until further orders. The banks were given credit for all such cash so quarantined and kept on behalf of SBP.

    In the meanwhile, central banks’ practices on the matter have been reviewed which indicate that quarantine of cash for 14 days is sufficient to disinfect the banknotes, which can then be put back into circulation.

    Similarly, the World Health Organization has also advised that the life of the virus on porous surfaces (such as paper banknotes) is lower, compared to other hard surfaces.

    In view of the above, banks are allowed to use the quarantined cash, which have completed quarantine period of fourteen (14) days.

    Consequently, the credit given to banks on account of quarantined cash would be reversed on the fifteenth (15th) day from each reported date.

    However, the facility of same day credit for quarantined cash introduced via FD Circular No. 1/2020 dated March 23, 2020 shall continue with contra debit on 15th day, as stated above.

  • April gains result best performing month for equity market in past 10 years

    April gains result best performing month for equity market in past 10 years

    The Karachi Stock Exchange (KSE) experienced an extraordinary surge in April 2020, recording an impressive increase of 4,880 points. This translates into a return of +16.7 percent Month-on-Month (MoM) and +21.5 percent in USD terms, marking the best-performing month since March 2009.

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  • Rupee gains 26 paisas against dollar on IMF inflows

    Rupee gains 26 paisas against dollar on IMF inflows

    KARACHI: The Pak Rupee gained 26 paisas against dollar on Monday owing to inflows of IMF loan payment.

    The rupee ended Rs159.91 to the dollar from previous close of Rs160.17 on April 30, 2020.

    Currency experts said that the rupee appreciated due to inflows of IMF funds and decline in international oil prices.

    They said that local currency would gain in coming trading days due to fall in international oil prices and improved external accounts.

    They said that that improved foreign direct investment and shrinking current account deficit helped the local currency to make gain.

    The inflow of Foreign Direct Investment (FDI) into Pakistan has witnessed sharp growth of 137 percent during first nine months (July – March) 2019-2020.

    The FDI increased to $2.15 billion during first nine months of current fiscal year as compared with $905 million in the corresponding period of the last fiscal year.

    Current account deficit (CAD) has contracted by 73 percent during first nine months (July – March) 2019/2020 due to significant decline in import bill.

    The current account deficit fell to $2.77 billion during first nine months of current fiscal year as compared with $10.28 billion in the corresponding period of the last fiscal year.

  • Misuse of Afghan transit trade should be checked

    Misuse of Afghan transit trade should be checked

    KARACHI: Smuggling through Afghan Transit Trade has always been the biggest threat for economic growth and hardly any sector has been left untouched by this menace.

    Pakistan Business Council (PBC) in its proposals for budget 2020/2021 said that smuggled goods through the borders of Afghanistan, Iran China, India and the Afghan Transit Trade form a chunk of the informal economy, volume of which ranges between 50 to 60 percent of the formal economy.

    It is costing the national exchequer in billions. Markets across the country are flooded with smuggled goods and local industries are struggling for survival as smuggled goods are not only easily available everywhere but are also attracting the buyers who prefer foreign merchandise Goods moving under ATT from Pakistan to Afghanistan should be charged with duties and taxes under the Pakistani laws and the same should be transferred to Afghan Government.

    Secondly, the duties/taxes so paid should be deposited with State Bank in USD.

    A quantitative restriction should be applied on goods moving under ATT on the basis of consumption.

    Allow industry to fairly compete with unscrupulous imports, Government to benefit from increased revenue.

  • Allied Bank declares 10% growth in annual net profit

    Allied Bank declares 10% growth in annual net profit

    KARACHI: Allied Bank Limited has declared 10 percent growth in annual profit for calendar year 2019 owing to significant increase in net mark-up income.

    According to financial results for calendar year 2019 released on Friday, the bank declared Rs14.11 billion after tax profit as compared with Rs12.88 billion profit in the preceding year.

    The bank also announced Rs12.32 as earning per share for the year as compared with EPS of 11.25 declared in the last year.

    The net interest income of the bank registered 29.24 percent increase to Rs41.5 billion in calendar year 2019 as compared with Rs32.11 billion in the preceding year.

    However, total non-markup income slightly fell to Rs10.89 billion in 2019 as compared with Rs11.29 billion in the last year.

    Therefore, the total income of the bank rose to Rs53.4billion in 2019 as compared with Rs43.4 billion in the preceding year.

    Operating expenses of the bank were increased at Rs28.18 billion in 2019 as compared with Rs24.52 billion in preceding year.

    The bank contributed income tax to the tune of Rs10.13 billion in the calendar year 2019 as compared with Rs8.13 billion in the preceding year, posting a significant increase of 25 percent.

  • SECP drafts framework to facilitate startups in Pakistan

    SECP drafts framework to facilitate startups in Pakistan

    ISLAMABAD: Securities and Exchange Company of Pakistan (SEC Pakistan) has issued draft regulatory framework to facilitate startups in the country.

    The SECP said that with the objective to promote growth in the startups sector of Pakistan, it is necessary to make relevant changes in Company Law to facilitate the incorporation process for the startups and provide a conducive regulatory environment.

    A) Proposed changes in the Parent legislation (Companies Act)

    i) Definition of Startups

    In the Third Schedule to the Companies Act, the following category is proposed to be added:

    An entity shall be considered as a Startup:

    a) Upto a period of 10 years from the date of incorporation/registration

    b) Turnover of the entity for any of the financial years since incorporation/registration is not greater than 100 Million Rupees

    c) Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

    Provided further that an entity formed by splitting up or reconstruction of an existing entity or a separate company with similar objects and ownership shall not be considered a “Startup Company”

    i) Amendment in the Section “83 – Further issue of capital” to offer “Employee Stock Option Scheme (ESOS)” shall help address the employee retention and reward issues being faced by startups.

    The following new proviso is proposed to be added:

    “Provided that the directors of private limited company may allot the declined or unsubscribed shares to its employees under “Employees Stock Option Scheme”, on such conditions, as may be specified.”

    ii) Amendment in the clause “88 – Power of a company to purchase its own shares” shall facilitate ESOS option and shall facilitate buy back of shares by companies, since they do not have a secondary market. It would also facilitate startups in case, any founding member needs to exit from the company by allowing return of shares to a company.

    B) Changes required in Companies (Further Issue of Shares) Regulations, 2018

    i) Amendment in the clause “7. Application to the Commission for issue of shares other than right” is a consequential change whereby no application for approval shall be required to be made to the Commission under Section 83 of the Act, by a Private Company, and shall only be required to maintain and file the documents with the Commission not later than two months from the decision to issue such shares, as specified in sub-regulation (2) below.

    ii) Conditions for issuance of shares with differential rights

    The requirement for the company not to default in filing financial statements and annual returns for three financial years immediately is being changed to preceding the financial year in which it is decided to issue such shares.

    iii) Furthermore, for a private limited company, the valuation mechanism of non-cash consideration and further conditions, if any, will be amended in Companies (Further Issues of Shares) Regulations, 2018.

    Introduction of Regulatory Sandbox

    Regulatory Sandbox is a tailored regulatory environment for conducting limited scale, live tests of innovative products, services, processes, and/ or business models in a controlled environment for a limited period of time so as to assess their viability to be launched on full-scale, and to determine the compatible and enabling regulatory environment that will be conducive for the innovative solutions. The objective of these Guidelines is to purposefully meet the above.

    The Regulatory Sandbox is primarily applicable for new products, services or business models which have not been addressed under existing laws and regulations; or these new ideas bring an innovative approach to the market and there exists considerable uncertainty in terms of unexpected adverse outcomes or existing regulatory framework does not fully address the solutions proposed to be experimented through the regulatory sandbox.